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American Airlines drops Mesa, citing financial problems

American Eagle Bombardier CRJ-900ER aircraft seen at Phoenix Sky Harbor International Airport.

Alex Tai | SOPA | Getty Images

American Airlines said Saturday that it will drop Water Mesa for some of its regional aircraft, citing concerns about its partner̵[ads1]7;s financial and operational problems, problems related to an increase in costs and the industry’s pilot shortage.

“As a result, we have concerns about Mesa’s ability to be a trusted partner for Americans going forward,” Derek Kerr, U.S. chief financial officer and president of U.S. regional brand American Eagle, said in a staff memo seen by CNBC on Saturday. “American and Mesa agree that the best way to address these concerns is to terminate our agreement.”

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American Airlines drops Mesa, citing financial problems


The last Mesa flight for American will be April 3, although American is reducing Mesa flights in March, Kerr said in his memo.

Now Arizona-based Mesa plans to transfer “all of our CRJ900s that fly to United Airlines,” a carrier it already flies for, Mesa CEO Jonathan Ornstein said in a memo to employees on Saturday, seen by CNBC.

united declined to comment.

Major carriers such as American, United and Delta Air Lines routinely contracts regional airlines to fly many shorter routes, and they account for about half of the departures, although this varies by airline.

The heart of the problem stems from a pilot shortage, which is most acute at regional carriers and has become more acute since travel demand rebounded from a pandemic travel slump. Mesa and other regional airlines have raised wages sharply to attract and retain fliers. American raised wages at its regional subsidiaries.

American refused to fund higher pilot fares for other regional partners, Mesa’s CEO told employees, adding that they were being penalized for not being able to meet pre-Covid contractual obligations.

“With that in mind, we are pleased to announce that we have negotiated a divestiture of our operations with American and are finalizing a new agreement with United that will transition all CRJ900 aircraft currently flying for American Eagle to United Express,” Mesa said Ornstein.

American did not comment on the Mesa message to employees.

Mesa had a net loss of about $67 million in the nine months ended June 30, according to a securities filing. Last week, the airline postponed its quarterly earnings report.

As of Sept. 30, 2021, about 45% of Mesa’s revenue came from American and 52% from United, according to the company’s most recent annual filing, which was published a year ago. Mesa also flies for DHL.

American said the deal with Mesa was primarily related to its hubs at Dallas/Fort Worth International Airport and Phoenix Sky Harbor International Airport.

American plans to concentrate its flying with its wholly owned regional subsidiaries such as Envoy and PSA, as well as an independent regional airline SkyWest. Air Wisconsin will also fly for the American Eagle brand, starting the deal earlier than originally planned, Kerr said.

“The flight previously performed by Mesa will be filled by these high-quality regional carriers as well as our mainline operation, ensuring we can continue to build and deliver the very best global network for our customers,” Kerr wrote.

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